Debenhams shareholders may face wipe out in restructuring

Debenhams shareholders including Mike Ashley warned they could be wiped out

This process seeks consent from bondholders to change the terms of their existing notes and enable Debenhams to enter into vitally-needed new loan facilities.

Debenhams is reportedly on the verge of securing a £200 million cash injection as a way to save the business and stave off a takeover campaign led by Mike Ashley and Sports Direct.

Last week, Sports Direct offered Debenhams a £150m loan and today said it had offered to buy Debenhams' Danish business Magasin Du Nord for £100m.

Earlier this month Ashley wanted to remove the board, except one and be appointed as chief executive, Sports Direct holds 30% shares in the retailer.

The attempt came as Debenhams admitted that its efforts to raise cash to secure the future of the business could wipe out shareholders, including Sports Direct, which has a 30% stake. It added there were "obvious concerns with the proposal that Mike Ashley becomes CEO of Debenhams given that Sports Direct owns our direct competitor House of Fraser".

However, the business warned that some restructuring options - if they materialise - would result in no equity value for current shareholders.

"Magasin du Nord had been put up for sale by Debenhams a year ago, and Sports Direct offered to purchase the business for £100m cash consideration (or, if Debenhams believes the business is worth more, has invited Debenhams to provide further details of its valuation)".

"The board has remained open to engagement with Sports Direct throughout its refinancing process and has provided clear guidance on what would represent workable solutions that would allow Sports Direct to participate while also protecting the interests of other stakeholders".

Sports Direct has resubmitted a bid to instate Mike Ashley as director of Debenhams and replace its board after it was revealed its first requisition, announced at the beginning of March, was invalid.

FILE PHOTO: A logo hangs above the Debenhams department store on Oxford Street in London, Britain December 17, 2018.

The £200m financing plan follows an offer by Sports Direct to provide an unsecured loan of £150m in a deal which would boost its stake in the business to 35% and see Mr Ashley installed as chief executive.

Specifically, it has launched a consent solicitation for holders of its 5.25% bonds due in 2021. Other permissions were sought to put in place inter-creditor arrangements and to grant collateral to support certain of the company's existing debt.

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